Title
Allied Banking Corp. vs. Yujuico
Case
G.R. No. 163116
Decision Date
Jun 29, 2015
Allied Bank sought debt collection from Jesus Yujuico for YLTC's loans. SC ruled Yujuico's liability extinguished due to valid revocation of guarantee and novation of loan terms.
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Case Digest (G.R. No. 163116)

Facts:

Background of the Case

  • Allied Banking Corporation (petitioner) filed a complaint against Jesus S. Yujuico (respondent) and others for the collection of a debt amounting to P6,020,000.00, representing the total obligations of Yujuico Logging & Trading Corporation (YLTC) under five promissory notes.
  • The case was initially filed in the Court of First Instance of Manila on November 7, 1978, and later transferred to the Regional Trial Court (RTC) after the Court of First Instance was abolished.

Credit Line and Guarantees

  • On January 10, 1966, General Bank & Trust Company (Genbank) approved a credit line of P800,000.00 for YLTC, secured by a Continuing Guarantee executed by Jesus S. Yujuico, Gregoria Y. Paredes, and Clarencio S. Yujuico.
  • On February 6, 1968, a new Continuing Guarantee for P1.5 million was executed by the same parties, replacing the previous guarantee.
  • The credit line was renewed annually from 1968 to 1973, with the amount increasing to P5 million in 1974. However, only Clarencio S. Yujuico executed a Continuing Guarantee for the P5 million credit line in 1974.

Revocation of Guarantee

  • On November 27, 1973, Teodoro Presa, acting on behalf of Jesus S. Yujuico, sent a letter to Genbank revoking the Continuing Guarantee for the P1.5 million credit line.
  • The RTC found that the revocation letter was valid and that Jesus S. Yujuico was no longer liable for loans incurred after the revocation.

Loans and Default

  • YLTC incurred loans in 1975 and 1976, evidenced by promissory notes totaling P6,020,184.90.
  • Genbank was placed under liquidation in 1977, and Allied Banking Corporation acquired its assets and liabilities, including the right to collect YLTC's debts.

Trial Court Decision

  • The RTC dismissed the complaint against Jesus S. Yujuico, ruling that his liability as a surety was extinguished by the revocation of the Continuing Guarantee and the novation of the loan agreement when the credit line was increased to P5 million.

Court of Appeals Decision

  • The CA affirmed the RTC's decision, holding that the revocation letter was valid and that Jesus S. Yujuico was not liable for loans incurred after the revocation.

Issue:

  1. Whether the revocation letter released Jesus S. Yujuico from his obligations as a surety.
  2. Whether the increase in the credit line from P1.5 million to P5 million novated the Continuing Guarantee, thereby releasing Jesus S. Yujuico from liability.

Ruling:

  • The Supreme Court affirmed the decision of the CA, holding that:
    1. Jesus S. Yujuico was a surety, not a guarantor, and was solidarily liable for YLTC's obligations under the Continuing Guarantee.
    2. The revocation letter effectively released Jesus S. Yujuico from liability for loans incurred after the revocation.
    3. The increase in the credit line to P5 million novated the loan agreement, and since Jesus S. Yujuico did not consent to the novation, he was no longer liable as a surety.

Ratio:

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